GEMD Gem Diamonds Limited

Thursday, 13 March 2025

Gem Diamonds Limited

Full Year 2024 Results

Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the "Group") announces its Full Year Results for the year ending 31 December 2024 (the "Period").

FINANCIAL RESULTS:

·      Revenue of US$154.2 million (US$140.3 million in 2023)

·      Underlying EBITDA of US$29.7 million (US$15.2 million in 2023)

·      Profit for the year of US$8.1 million (US$1.6 million in 2023)

·      Attributable profit of US$2.9 million (loss of US$2.1 million in 2023)

·      Earnings per share of 2.1 US cents (loss per share of 1.5 US cents in 2023)

·      Net debt of US$7.3 million as at 31 December 2024 (2023: net debt of US$21.3 million)

OPERATIONAL RESULTS:

Letšeng

·      Carats recovered of 105 012 (109 656 carats in 2023)

·      Waste tonnes mined of 5.4 million tonnes (8.8 million tonnes in 2023)

·      Ore treated of 5.0 million tonnes (5.0 million tonnes in 2023)

·      Average value of US$1 390 per carat achieved (US$1 334 in 2023)

·      The highest dollar per carat achieved for a white rough diamond during the year was US$41 007 per carat

Safety performance

The Group maintained and excellent safety performance in 2024, achieving our lowest AIFR on record of 0.61 (2023: 0.67). The Group had zero fatalities (2023: zero), three LTIs (2023: two) and an LTIFR of 0.18 (2023: 0.10).

Financial performance

The global economic landscape in 2024 was marked by uncertainty, with persistent inflation, higher interest rates for longer periods than expected, and geopolitical tensions weighing on growth. As a result, the downward pressure on the diamond market persisted. Despite these challenges, the Group achieved a 10% increase in revenue, mainly driven by the 13 diamonds greater than 100 carats that were sold. The increase in revenue, together with the implementation of numerous cost reduction initiatives resulted in a 95% increase in underlying EBITDA compared to 2023.

Operational performance

The benefits of the structural changes implemented in 2023 and 2024 is evident in Letšeng's operational performance during the year. The targeted initiative to control the ore feed rate into the treatment plants resulted in a significant improvement in plant stability and an increase in overall plant utilisation to 80% in 2024 (up from 78% in 2023 and 75% in 2022).

Decarbonisation strategy

The Group achieved a cumulative 27% reduction of its Scope 1 and Scope 2 carbon emissions compared to its decarbonisation target of a 30% reduction by 2030, against a 2021 baseline.

Letšeng's updated long-term mine plan

A key focus for 2024 was optimising Letšeng's long-term life of mine plan. A steeper open-pit concept was approved for the final cutback of the Satellite pit that will significantly reduce waste volumes, leading to an updated mine plan that was communicated to the market in December 2024.

Commenting on the results today, Clifford Elphick, Chief Executive Officer of Gem Diamonds, said:

"2024 was another challenging year for the diamond market with decreasing rough and polished diamond prices. Our relentless focus on factors within our control - cost containment, operational efficiencies and appropriate capital allocation, has yielded pleasing results.

We are proud of our excellent safety performance in 2024 and commend our management and workforce for their daily commitment to operate safely and responsibly.

Our focus now is on the safe implementation of Letšeng's updated mine plan, which will significantly reduce waste volumes. The next four years will be challenging with limited access to higher-value Satellite ore. We will continue to look for opportunities to further optimise our mine plan to ensure the profitability of our operations.

2025 has begun with modest improvements in prices of both rough and polished diamonds. We are optimistic that this will continue throughout the year."

The Company will host a live audio webcast of the full year results today, 13 March 2025, at 9:30 GMT. If you would like to attend the webcast please register using this link: 2024 Full Year results webcast

The page references in this announcement refer to the Annual Report and Accounts 2024 which can be found on the Company's website: www.gemdiamonds.com.

The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67

FOR FURTHER INFORMATION:

Gem Diamonds Limited

Kiki Constantopoulos, Company Secretary

ir@gemdiamonds.com

Celicourt Communications

Mark Antelme / Felicity Winkles

Tel: +44 (0) 207 777 6424

ABOUT GEM DIAMONDS:

Gem Diamonds is a leading global producer of high value diamonds. The Company owns 70% of the Letšeng mine in Lesotho. The Letšeng mine is famous for the production of large, exceptional white

diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.

CHAIRPERSON'S STATEMENT

In a year marked by significant challenges, our commitment to strong governance and adaptability enabled us to navigate the pressures of a downturn in the diamond market while laying a solid foundation for sustainable growth in the future.

Dear shareholders,

On behalf of the Board of Directors, I am pleased to share with you the Gem Diamonds Annual Report and Accounts for 2024, which outlines the Group's performance during another challenging year for the diamond market.

The diamond industry continued to face significant challenges amid global macro-economic headwinds. Despite efforts by major producers to limit supply, both diamond demand and prices remained under considerable pressure. Additional factors, such as the high inventory levels in and the growing prevalence of lab-grown diamonds, further exacerbated the challenges facing the industry.

At Letšeng, the positive impact of numerous initiatives implemented over the past 24 months is evident in the 2024 results. These efforts included strengthening cost controls, strategic workforce alignment, the insourcing of key activities - such as mining services and processing - and a strong focus on enhancing operational efficiencies. The financial results are discussed in the CFO Review on page 33 and the financial statements are available from page 106. The COO Review on page 40 contains the full details of Letšeng's operational performance during 2024.

The terms for the relinquishment of the mining licence and handover of the Ghaghoo mine site to the Botswana Department of Mines have been agreed and, subject to final approval, the process is expected to be finalised by the end of March 2025. We would like to express our gratitude to the Government of Botswana for their cooperation on this matter.

We are pleased to report that no significant environmental or social incidents were reported at any of our operations during the year.

GOVERNANCE MATTERS IN 2024

The Governance section from page 53 provides full details of all corporate governance matters relevant to the Group in 2024.

No changes were made to the makeup of the Board of Directors during 2024, and the governance structure was aligned with the independence requirements of the UK Corporate Governance Code. The Board was fully representative with respect to both gender and ethnic minority groups.

Michael Lynch-Bell, the Senior Independent Director (SID) and Chair of the Audit and Remuneration Committees, is retiring in advance of the 2025 AGM. The Board will appoint Janet Blas as the new non-Executive Director effective 1 April 2025. Janet will also take up the position of Chair of the Audit Committee, while Rosalind Kainyah will succeed Michael as SID and Chair of the Remuneration Committee.

We are aware of the changes included in the UK Corporate Governance Code 2024 and will be implementing these as relevant.

The findings from the internal Board performance review concluded at the end of 2023 were considered. The review offered only minor improvement opportunities, which were implemented in 2024. These included a modest refining of the Committee meeting structure and schedule to improve efficiency and a review of ongoing training provided to Directors to support them in their work.

Consistent with past practice, 99% of the workforce at Letšeng is from within Lesotho. Enhancing female representation in our workforce remains a key priority, and we have implemented various initiatives in local communities and schools to raise awareness of the diverse career opportunities available in the mining sector. Through these efforts, we aim to position Letšeng as an employer of choice for women.

SAFETY PERFORMANCE

The safety and health of our workforce remains our highest priority. Letšeng maintained its exceptional safety performance during 2024, and this consistency is a testament to the efforts and commitment of the entire workforce over many years. The Board would like to express its gratitude to management for their strong leadership in this critical aspect. We do, however, remain constantly vigilant and alert to both existing and emerging risks as we strive to extend our strong and collaborative safety culture. 

The COO Review on page 40 contains full details of Letšeng's safety performance during 2024.

LETŠENG'S UPDATED MINE PLAN

Letšeng's NI 43-101 Technical Report and 2024 Resource and Reserve Statement was published in March 2024 and is available on the Group's website at www.gemdiamonds.com.

As reported in the Annual Report and Accounts 2023, a number of different options to extend the life of the Satellite pit had been under consideration for some time. During 2024, a group of internationally recognised experts were engaged to determine whether it would be viable to steepen the slope angles in certain basalt sectors of the Satellite pit, thereby allowing for a considerable reduction in waste stripping required for an additional Satellite pit cutback. An intense review process ensued, driven by senior Executive Management and overseen by the Board, to evaluate the technical, safety, economic and overall feasibility of the concept, which was completed in the last quarter of 2024. Following sign-off by the external experts and the Board, the Letšeng mine plan was updated, resulting in a substantial reduction in waste volumes in the last open pit cutback of the Satellite pit. After careful consideration of all key factors, the Board approved the updated mine plan. An investor presentation was made to the market on 3 December 2024 and is available on the Group's website at www.gemdiamonds.com.

It is important to note that while waste for the final cutback of the Satellite pit is being mined, no Satellite ore will be available from 2026 to the end of 2029. During this time, the business will be completely dependent on Main Pipe ore, which typically produces diamonds of a lower value than the Satellite Pipe, with higher-value ore from the Satellite Pipe returning to the mix late in 2029. The Board will continue to provide the necessary focus and oversight to navigate this challenging period. We would like to thank our banking partners and lenders, who have demonstrated their trust in our ability to manage through this period by extending our revolving credit facilities, which expired in December 2024, for a further 24-month period.

Refer to the COO Review for details of the updated mine plan on page 43.

DECARBONISATION STRATEGY

At the beginning of 2023 we announced our decarbonisation strategy, which sets out our commitment to reduce our Scope 1 and Scope 2 carbon emissions by 30% (as measured against our 2021 emissions) by 2030. We are pleased to report that we have already achieved a cumulative 27% reduction against the 2021 baseline by the end of 2024 and that we remain on track to meet our 2030 target.

A wide range of different initiatives have been identified and implemented to reduce our energy usage, aided by the refinement of the mine plan, which will lead to a reduction in waste mining and thereby directly reduce our Scope 1 carbon emissions. The carbon and energy footprint of the Group in 2024 is detailed in the Climate Change Report on page 47.

Our primary focus is to reduce our reliance on high-carbon grid electricity supplied by Eskom and diesel-generated electricity on site. We are actively exploring alternative large-scale, long-term renewable energy solutions that could be effective in the specific high-altitude geography of the Maluti mountains of Lesotho.

STAKEHOLDER ENGAGEMENT

The Government of the Kingdom of Lesotho is a significant shareholder and our partner in the Letšeng mine, and we remain committed to maintaining strong and constructive relationships with officials across all departments. The Board extends its gratitude to the Lesotho Government for its cooperation and for its ultimate support of Letšeng's updated mine plan. The new plan secures Letšeng's long-term sustainability, reinforcing its role as a key employer and contributor to Lesotho's economy.

We recognise the critical importance of maintaining open and transparent communication with all stakeholders. Dialogue based on mutual trust and respect enables us to keep them informed of key developments in our operations and to address any concerns they may have. Transparency is essential to maintaining stakeholder trust, and this in turn ensures that wider economic, social and political headwinds can be navigated smoothly and in the best interests of all parties. To this end, we have established a range of formal and informal stakeholder engagement forums that meet regularly, ensuring that key discussions and concerns are routinely relayed to the Board for its consideration.

APPRECIATION

On behalf of the Board, I would like to extend my deepest gratitude, first and foremost, to our people. Our executive and senior management led the operations with unwavering focus through yet another challenging year for the diamond market, and every member of our workforce played a vital role in the Group's success in 2024. We also sincerely appreciate the ongoing support of our community partners, the Government of the Kingdom of Lesotho, the Government of Botswana, and our shareholders. Lastly, I would like to thank my fellow Directors for their valuable contributions and insights throughout the year. In particular, I would like to thank Michael Lynch-Bell for his many years of dedicated service on the Board, acting as SID and Chairperson of the Audit and Remuneration Committees. We look forward to welcoming Janet Blas to the Board and to benefiting from the fresh perspectives she will bring.

Harry Kenyon-Slaney

Chairperson

12 March 2025

RISK MANAGEMENT

HOW WE APPROACH RISK

The Group's risk management framework, which is fully integrated with strategic and operational planning, aims to identify, manage and respond to the Group's risks and uncertainties. The framework combines top-down and bottom-up approaches with appropriate governance and oversight.

Risk management framework

The Board is ultimately responsible and accountable for the Group's risk management function. It is supported by its subcommittees and senior management in overseeing the Group's most relevant and significant current and emerging risks. These risks are actively identified, assessed, prioritised, managed and mitigated as much as reasonably possible, as they could negatively impact the Group's ability to execute its strategy.

While the Group's risk management framework focuses on risk identification and mitigation, many of the factors that give rise to these risks also present opportunities. Gem Diamonds tracks these opportunities and incorporates them into the strategy where they appropriately support the Group's purpose.

The Board and its subcommittees have identified the following key strategic, operational and external risks, which have been set out in no order of priority.

VIABILITY STATEMENT

The Board has assessed the viability of the Group over a period significantly longer than 12 months from the approval of the financial statements, in accordance with the UK Corporate Governance Code. The Board considers three years from the financial year end to be the most relevant period for consideration for this assessment, given the Group's current position and the potential impact on the Group's viability of the principal risks documented on pages 21 to 26.

While the Group maintains a full business model, based predominantly on the life of mine plan for Letšeng, the Group's annual business and strategic planning process also uses a three-year time horizon. This process is led by the CEO and CFO and involves all relevant functions including operations, sales and marketing, finance, treasury and risk. The Board participates in the annual review process through structured Board meetings and annual strategy review sessions. A three-year period provides sufficient and realistic visibility in the context of the industry, the environment in which the Group operates, and the current short-term mine plan, even though the life of mine, the mining lease tenure and available estimated reserves exceed three years.

The business and strategic plan reflects the Board's best estimate of the Group's prospects. The Board evaluated several additional scenarios and assessed their potential impact on the Group by quantifying their financial impact and overlaying this on the detailed financial forecasts in the plan.

The Board's assessment of the Group's viability focused on the critical principal risks categorised within the strategic, external and operational risk types, together with the effectiveness of the potential mitigations that management reasonably believes would be available to the Group over this period.

GROUP FACILITIES

The Group has access to US$69.7 million in RCFs when fully available. Of these RCFs, US$6.0 million was utilised at the end of the year. The Group's RCFs mature on 21 December 2026 following the successful 24-month extension of the facilities that was finalised during the year. In addition, there is a general banking facility of US$5.3 million with no set expiry date which is reviewed annually by the lenders. This facility was fully available at the end of the year.

ROUGH DIAMOND MARKET

For a review of the diamond market, refer to page 30.

The diamond market remained under significant pressure in 2024 due to a challenging macro-economic environment and international conflicts that negatively impacted rough and polished diamond prices. The market is expected to remain under pressure, with signs of a modest recovery in diamond prices seen in 2025.

OPERATIONAL UPDATES

For a review of our operations and costs, refer to pages 34 and 41 of the Performance Review.

At Letšeng, the risk of rising operating costs has been minimised to an extent by a wide array of implemented right-sizing and insourcing within the mining, processing and housekeeping activities, together with improved plant stability and reduced waste mining requirements (the approved redesign of a steeper SC6W reduces waste stripping by 65.8 million tonnes compared to the previous conventional design). Cost reduction and mine plan optimisation remain ongoing priorities within the business.

CLIMATE CHANGE

The Board is cognisant of the risks presented by climate change and conscious of the need to minimise carbon emissions. A Group-specific climate change scenario analysis was conducted to assess the short to medium and longer-term physical risks. The short to medium-term impacts fall within the viability period. The physical risks identified for Letšeng, such as drought, strong winds, extreme precipitation and cold, are similar to its current operating conditions. The operation is therefore well geared to manage these conditions within its current and medium-term operational activities, cost structure and business planning. Additional cash investment required in the event of these short to medium-term physical risks materialising has been assessed as low with no material impact on the current operations and viability of the Group.

In terms of transitional risks, as users of grid-supplied and fossil fuel energy, the short-term focus is on improving energy efficiencies in our operational processes and reducing the use of fossil fuels. Options are being assessed in light of the size, nature and location of the Group's operations, the required investment and the expectations of our main stakeholders. Any material investment during the viability period is considered unlikely. Due to uncertainty around the cost and timing of implementation of carbon-related taxes, the impact of such taxes on the Group's operations and cash flows has been excluded from the viability assessment and scenario stress testing. Management and the Board will continue to assess these impacts as the information becomes more certain. The Group has adopted a carbon-pricing model that will be used to responsibly assess the potential financial impact of future projects. The Group has also adopted a decarbonisation strategy that is aimed at reducing potential future carbon tax liabilities.

STRESS TESTS

The scenarios tested considered the Group's revenue, cash flows and other key financial ratios over the three-year period. The scenarios included the compounding effect of the factors below and were applied independently of each other. In addition, the scenarios assumed the successful renewal of the RCFs following their expiry in December 2026. The stress scenarios reflect the magnitude of outcomes that would result in a net debt position equivalent to the total RCFs.

CONCLUSION

The Group ended the year in a net debt1 position of US$7.3 million with undrawn available credit facilities of US$69.0 million. These facilities expire on 21 December 2026 following the 24-month extension concluded in 2024. The Group will follow all necessary processes to renew these facilities for an extended period before the 2026 expiry date, as has been the practice in the past.

The Board is aware that the implementation of Letšeng's updated mine plan will present material challenges for the business, with no availability of Satellite ore until the end of 2029 while the steeper slopes are being implemented. During this period, our focus will remain on factors within our control, including cost containment, sound capital allocation, and maintaining operational efficiencies, all while responsibly managing our cash resources. The ongoing optimisation of the mine plan (as mentioned in the COO Review on page 46) will be a major focus.

Based on the robust assessment of the principal risks, prospects and viability of the Group and the successful renewal of the facilities, the Board confirms that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period ending 31 December 2027.

1     Net debt is calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing and credit underwriting fees).

CHIEF EXECUTIVE OFFICER'S REVIEW

Global economic uncertainty and negative consumer confidence further impacted the diamond market in 2024.

The global economic landscape in 2024 was marked by uncertainty, with persistent inflation, higher interest rates for longer periods and geopolitical tensions weighing on growth. While some economies showed resilience, challenges such as supply chain disruptions, fluctuating commodity prices, and slower demand in key markets continued to create volatility, all of which negatively impacted consumer confidence and luxury spending.

The economic landscape in China, an important consumer of diamonds, was marked by slow growth in 2024 due to persistent property sector challenges and weak consumer confidence. Despite government stimulus measures, including monetary easing and infrastructure spending, economic momentum remained subdued due to sluggish domestic demand and global trade uncertainties. Geopolitical tensions and supply chain shifts also impacted export performance.

These macro-economic challenges contributed to the continued downturn of the diamond market, where demand and prices remained under pressure despite efforts by major producers to regulate supply. The lower end of the diamond market was also impacted by the continued rise in sales of lab-grown diamonds, whose popularity and pricing continue to influence consumer purchasing decisions.

High inventory levels, and higher interest rates impacting diamond manufacturers who rely on financing, further negatively influenced pricing. A similar prolonged downturn of the diamond market has not been seen in more than four decades.

In this environment, we maintained our strong focus on improving operational efficiencies and cost containment to ensure the future economic viability of our operations. This included insourcing mining, processing and certain other activities, renegotiating selected contracts, and interrogating all capital expenditure. The initiatives that were implemented over the past 24 months at the Letšeng operation yielded pleasing results, with a strong operational performance in 2024. The fact that we are the only fully operational diamond mine remaining in Lesotho speaks to our resilience and agility to adapt in the face of these challenges.

Our NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement was published in March 2024 and is available on the Group's website at www.gemdiamonds.com. Following from this, a major focus in 2024 was to evaluate the resource to determine how to maximise returns and ensure sustainable mining for the remaining economic life of the mine. The steeper conventional slope design in the Satellite pit, which will significantly decrease waste volumes, was signed off by world-renowned experts, approved by the Board, and presented to the market in December 2024. The details of this important work are set out in the COO Review on page 43.

We are actively working towards our decarbonisation target of a 30% reduction in Scope 1 and 2 emissions by 2030 (measured against our 2021 footprint). We are pleased to report that we achieved a cumulative 27% reduction against the 2021 baseline by the end of 2024 and are on track to meet our 2030 decarbonisation target.

EXTRACTING MAXIMUM VALUE FROM OUR OPERATIONS

We operated safely, responsibly and efficiently during the year. Production stabilised following the implementation of targeted initiatives to improve plant stability and increase diamond recoveries. Overall carats recovered decreased by 4% compared to 2023, mainly due to a lower contribution from the higher-grade Satellite Pipe during the year. We reduced our waste investment by 39% compared to 2023, with a total of 3.4 million tonnes.

13 diamonds greater than 100 carats were recovered during the year, and exceptional sales included an 11 carat  pink diamond that was sold for US$45 537 per carat, a 63 carat Type IIa white diamond that was sold for US$41 007 per carat, and a 113 carat Type IIa white diamond that was sold for US$39 345 per carat.

We have an effective, transparent and competitive tender sales process in Antwerp. Selected rough diamonds were also sold pursuant to the limited supply agreement established in 2022 with two key diamond manufacturing clients who supply polished diamonds to some of the world's most premium luxury brands. These diamonds are polished to precise specifications required by the brands, realising additional upside polished value for the Group. This is a further step in the Group's strategy of focused delivery of top-quality diamonds to promote Letšeng as an exceptional diamond brand and Lesotho as the place origin, and to achieve premium prices for our diamonds.

Despite the persistent downward pressure on rough and polished diamond prices throughout the year, our average price achieved increased to US$1 390 per carat in 2024 compared to US$1 334 per carat in 2023, mainly due to the increased number of diamonds greater that 100 carats sold. The higher prices achieved and increase in carats sold resulted in total revenue of US$154.2 million, a 10% increase compared to 2023.

The Group managed to change its cost base, and as a result achieved an underlying EBITDA1 of US$29.7 million and ended the year in a net debt2 position of US$7.3 million.

Full details of the Group's financial performance are included in the CFO Review on page 33.

1     Refer Note 4, Operating profit on page 138 for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.

2     Net debt is a non-GAAP measure and calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing).

WORKING RESPONSIBLY AND MAINTAINING OUR SOCIAL LICENCE

We maintained our excellent safety performance in 2024. We recorded no fatalities for the fifth consecutive year, three LTIs (2023: two), and achieved our lowest overall AIFR on record of 0.61 (2023: 0.67). The drive to mature the organisational safety culture since June 2021 continues to yield results of which we are very proud, especially given the harsh operating environments at Letšeng and Ghaghoo. We will continue to entrench a workplace safety culture founded on individual responsibility, mutual care and collaboration.

We adhere to the highest environmental management standards. The bioremediation plant that was successfully commissioned in February 2024 is effectively reducing nitrates in the water leaching from our blasted waste rock dump.

Our residue storage facility management process aligns with the ICMM's GISTM. Our residue storage and freshwater facilities are subject to regular inspections by internal as well as independent external experts. These professional external reviews, together with the internal governance, monitoring and reporting processes, provide assurance that our freshwater dam and residue storage facilities are being managed in a safe and responsible manner.

Our CSI activities are built around our chosen eight UN SDGs and are focused on supporting infrastructure development, education and health while assisting and stimulating small businesses. In 2024, we supported small agricultural operations including those in egg, vegetable and dairy production, maintained gravel roads in nearby villages, and installed sustainable water supply infrastructure for five villages. From 2016 to 2024, the Group has invested US$5.1 million in sustainable CSI initiatives.

In 2024, Letšeng contributed a total of US$20.7 million (LSL379.0 million) to the Lesotho fiscus in the form of taxes, royalties, dividends and mining lease payments. We are proud of our contribution to this developing economy and our position as a significant employer and contributor to the overall fiscus of Lesotho.

PREPARING FOR THE FUTURE

Our primary focus in 2025 is the safe and timely implementation of Letšeng's updated mine plan following the approval of the steeper conventional concept for the Satellite pit. This will significantly reduce the waste mining investment required for the final open pit cutback of the Satellite pit. The reliance on lower-value Main Pipe ore until the end of 2029, while the waste stripping of the final cutback of the Satellite pit is being implemented, presents financial challenges, as no higher-value Satellite Pipe ore will be accessible during this period. We are well prepared to navigate this difficult period, largely assisted by the step change that we have implemented in our cost base over the past few years and the availability of our revolving credit facilities following the successful 24-month extension of these at the end of 2024.

We remain focused on the need to identify and implement sustainable alternative energy solutions for the short, medium and long term. Grid electricity supply in 2024 was relatively stable due to the suspension of load shedding by Eskom since March 2024. We do, however, note the challenges ahead for Lesotho due to the extremely high electricity consumption of the machinery being used to construct the second phase of the Lesotho Highlands Water Project. We would like to express our appreciation to the Lesotho Government and, in particular, His Majesty King Letsie III, for leading efforts across Europe to get support for alternative energy solutions in Lesotho.

Our capital plans prioritise funding for projects that will sustain growth and create value. The planned capital projects in 2025, although not financially significant, include the required extension of the Patiseng coarse residue storage facility to align its capacity with future mining activities, replacement of the mining fleet to align with the updated mine plan, and other opportunities, such as extending the life of Satellite Cut 5 West, to aid with diamond recoveries.

OUTLOOK

2024 was marked by national elections in a number of major economies, the outcomes of which have increased uncertainty and may lead to further volatility, with looming trade wars and a subdued global growth outlook. There have been reports of a modest recovery in diamond prices in early 2025 and we are optimistic that this will continue. In this regard, it is pleasing to note that the global luxury market continued its growth trend in 2024. The luxury market appears well positioned to cope with economic turbulence, with high-end luxury brand Richemont reporting single-digit growth in their jewellery sales year on year and further investment in their jewellery manufacturing capacity.

In the medium to long term, rough diamond prices should be supported by favourable demand and supply fundamentals, with a projected further decrease in natural rough diamond supply. Over the longer term, this dynamic of rising demand and constrained supply is expected to benefit high-quality rough diamonds in particular. The fundamentals that underpin our business are sound and strongly position Gem Diamonds for success.

APPRECIATION

I would like to extend my sincere gratitude to the Board for their unwavering support and commitment in 2024, especially for their valuable input, guidance and support during the important work that culminated in Letšeng's updated mine plan being approved. I am grateful to our executive and management teams and our workforce, and appreciate the dedication required to deliver the operational and safety performance of 2024. In addition, their commitment to delivering our strategic goals and upholding our values was commendable. I would like to thank our lenders, with whom we have a long-standing relationship, who continue to support our business with the extension of our facilities. A special word of thanks to our clients for their continued trust in Letšeng's diamonds, and to our shareholders for their ongoing support. Finally, I would like to thank the Government of the Kingdom of Lesotho and the Government of Botswana for their support.

Clifford Elphick

Chief Executive Officer

12 March 2025

CHIEF FINANCIAL OFFICER'S REVIEW

The Group delivered a pleasing financial performance in 2024, driven by operational excellence in the face of ongoing pressure on the diamond market.

The unstable global economic conditions and resultant pressure on the diamond market continued into 2024, despite easing inflation and conservative interest rate cuts in certain major economies.

Letšeng performed well operationally, achieving or exceeding all mining and processing guidance metrics (refer to the COO Review on page 40). The increase in carats sold assisted in setting off lower diamond prices, resulting in revenue from the sale of rough diamonds of US$152.8 million, achieving an average price of US$1 390 per carat for the year. In addition, US$1.4 million of margin uplift was generated, bringing total revenue for the year to US$154.2 million.

Underlying EBITDA increased to US$29.7 million from US$15.2 million in 2024. The Group reported a profit attributable to shareholders for the year of US$2.9 million, equating to a basic profit per share of 2.1 US cents on a weighted average number of shares in issue of 139.7 million.

The Group ended the year with a cash balance of US$12.9 million and drawn down facilities of US$20.2 million, resulting in a net debt position of US$7.3 million and available undrawn facilities of US$69.0 million, compared to the net debt position of US$21.3 million at the end of 2023. The improvement in net debt of US$14.0 million is a testament to the Group's performance and resilience despite the ongoing challenges in the diamond market.

Summary of financial performance

Refer to the full annual financial statements from page 106.

1     Including waste stripping amortisation but excluding depreciation and mining asset amortisation.

2   Underlying EBITDA as defined in Note 4, Operating profit of the notes to the consolidated financial statements.

Revenue

Revenue increased 10% compared to 2023, mainly due to a 5% increase in carats sold of 109 967 carats compared to 104 520 in 2023. Rough diamond revenue of US$152.8 million (2023: US$139.4 million) was generated at Letšeng, achieving an average price of US$1 390 per carat (2023: US$1 334 per carat). The 4% increase in the average price per carat achieved can be attributed to the improved quality of recoveries and the increased number of larger than 100 carat diamonds sold (13 compared to five in 2023), as prices, on a like-for-like basis, decreased during the year.

Additional revenue is generated through an arrangement with two diamond manufacturing customers to supply polished diamonds to some of the world's most premium luxury brands, and other partnership arrangements. These agreements allow the Group to share in the margin uplift on the sale of polished diamonds. In 2024, additional revenue of US$1.4 million (2023: US$0.9 million) was generated from these arrangements.

·      Non-cash accounting charges and working capital movement refers to waste amortisation, stockpile and diamond inventory movements and interest and depreciation on IFRS 16 leases. These charges increased by 33% to LSL571.9 million (US$31.2 million) (2023: LSL431.5 million, US$23.4 million), mainly due to an increase in stockpile and inventory on hand at the end of 2024. This resulted in diamond inventory and stockpile movement of LSL112.3 million (US$6.1 million) in the current year compared to a credit to the income statement of LSL25.6 million (US$1.4 million) in 2023.

·      Total operating costs in local currency decreased to LSL1 838.5 million (US$100.3 million) from LSL1 881.3 million (US$102.1 million) in 2023, which includes the impact of direct cash costs, non-cash accounting charges and working capital movements detailed above. The unit cost per tonne treated decreased by 2% to LSL366.34 (US$19.98) per tonne treated (2023: LSL374.41, US$20.29 per tonne treated), mainly due to the various cost containment measures implemented during the year, such as the insourcing of the mining and processing activities.

·      Waste cash costs decreased by 43% to LSL335.4 million (US$18.3 million) from LSL583.8 million (US$31.6 million) in 2023, mainly due to the 39% reduction in waste tonnes mined (5.4 million tonnes compared to 8.8 million tonnes in 2023) driven by initiatives such as the steepening of slopes in the Main pit. The insourcing of mining activities and other cost containment initiatives, together with reduced diesel consumption resulted in a 6% decrease in waste cash cost per waste tonne to LSL61.87 (US$3.37) from LSL66.03 (US$3.58) in 2023, despite the significantly lower waste tonnes mined.

US dollar-reported costs

Gem Diamonds' revenue is generated in US dollars, while the majority of operational expenses are incurred in the relevant local currency in the operational jurisdictions. Local currency rates for the Lesotho loti (LSL) (pegged to the South African rand) were stronger against the US dollar on average compared to 2023, although the year ended at weaker levels. This increased the Group's US dollar-reported costs and decreased local currency cash flow generation. The average and year-end exchange rates are set out in the table below:

Royalties and marketing costs

In terms of Letšeng's mining lease, royalties are paid to the Government of the Kingdom of Lesotho on the value of rough diamonds sold. The Group's sales and marketing operation in Belgium incurs costs relating to diamond selling and marketing. Royalties and selling costs increased by 7% to US$16.5 million (2023: US$15.3 million), in line with the increase in rough diamond revenue.

Corporate costs

The technical and administrative office in South Africa and the head office in the UK provide expertise in all areas of the business to realise maximum value from the Group's assets. Central costs are incurred in South African rand and British pounds, respectively.

Corporate costs (excluding depreciation) were maintained at similar levels to 2023 at US$7.7 million. Project costs of US$0.3 million were incurred on the ongoing sales process of Ghaghoo and investigating external growth opportunities (2023: US$0.2 million).

Underlying EBITDA1 and attributable profit

Group underlying EBITDA1 increased by 95% to US$29.7 million (2023: US$15.2 million), mainly due to the increase in revenue in the current year. The profit attributable to shareholders was US$2.9 million, which translates to a profit of 2.1 US cents per share based on a weighted average number of shares in issue of 139.7 million.

1     Underlying EBITDA as defined in Note 4, Operating profit of the notes to the consolidated financial statements.

Statement of financial position - selected indicators

* Certain balances as previously presented were restated. Refer Note 28, Restatement of prior year balances in the notes to the consolidated financial statements.

Capital expenditure

Total capital expenditure (excluding waste stripping) was US$5.8 million during the year (2023: US$30.4 million). In 2023, the mining fleet and support equipment were acquired for US$22.7 million following the insourcing of the mining activities at Letšeng. The capital spend in the current year related to the upgrade of the recovery and sorthouse facilities, the upgrade of the stores facilities to enhance inventory management, the expansion of the Patiseng residue storage facility to build necessary capacity, and amounts relating to the finalisation of the Resource and Reserve Statement that was published in March 2024.

Cash on hand

The Group ended the year with cash on hand of US$12.9 million (2023: US$16.5 million) and net debt of US$7.3 million (2023: US$21.3 million), which reflects an improvement in net debt of US$14.0 million year on year. Group cash generated by operations was US$68.3 million before capital and waste investment of US$27.6 million.

Loans and borrowings

The Group-wide debt facilities for Letšeng (LSL450.0 million (US$23.8 million) and ZAR300.0 million (US$15.9 million)) and Gem Diamonds (US$30.0 million), which were concluded in December 2021 for an initial three-year period, were due to expire in December 2024. These facilities were successfully extended during the year for a further 24-month period, extending the expiry date to 21 December 2026.

Letšeng has a ZAR100.0 million (US$5.3 million) general banking facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division), which is reviewed annually. The facility was utilised from time to time during the year and was fully repaid by year end.

The funding partners for the existing facilities are Nedbank, Standard Bank and Firstrand Bank (through their respective operations). Nedbank's portion of the funding, totalling US$29.4 million, is a sustainability-linked loan (SLL), an innovative structure that links the margin and resultant interest rate on the SLL to the Group's ESG performance. The margin on the SLL decreases subject to the Group meeting certain carbon reduction and water conservation KPIs that are aligned with the Group's sustainability strategy. These KPIs are assessed at the end of every financial year. 

The two KPIs included for the SLLs both need to be met at each measurement date before the margin reduction on these loans becomes effective. At 31 December 2023 and 31 December 2024, both the carbon emission and water conservation KPIs were met, and therefore the margin reduction was applied to outstanding balances in 2024 and will apply to outstanding balances in 2025.

In 2022, Letšeng implemented a four-and-a-half-year project facility agreement with Nedbank for the replacement of the PCA for an amount of ZAR132.0 million (US$7.2 million). The facility is underwritten by the Export Credit Insurance Corporation of South Africa (ECIC). Quarterly repayments of this facility commenced in Q1 2024, and at the end of 2024 an amount of LSL94.3 million (US$5.0 million) was outstanding. The facility expires in May 2027.

On 15 May 2024, Letšeng entered into a secured five-year term loan facility of LSL200.0 million (US$10.6 million) jointly with Standard Lesotho Bank and Nedbank Lesotho. The loan is secured by a special notarial bond over the mining fleet and equipment acquired as part of the insourcing of the mining activities at the end of 2023. The loan is repayable in equal monthly instalments that commenced in May 2024, and expires on 30 April 2029.

At year end, the Group had utilised facilities of US$20.2 million, resulting in a net debt position of US$7.3 million and available facilities of US$69.0 million. Gem Diamonds, the Company, ended the year with US$6.0 million of its facility drawn down (2023: US$6.0 million) and US$24.0 million available. Letšeng ended the year with no utilisation of its revolving credit facility (2023: US$24.6 million) and the full US$39.7 million available.

Summary of loan facilities as at 31 December 2024    

Ghaghoo

The terms to relinquish the mining licence and hand over the Ghaghoo mine site to the Botswana Department of Mines have been agreed, and the process is expected to be finalised by 31 March 2025.

Care and maintenance cash costs decreased to US$1.6 million in 2024 (2023: US$1.8 million), which is included in other operating expenses in the financial results. An additional US$0.2 million (2023: US$0.2 million) on the unwinding of the environmental rehabilitation provision resulted in a non-cash interest charge which is included in finance costs. In addition, a US$0.6 million reduction in the rehabilitation provision has been included in operating income and expenses.

The site has been cleaned up in preparation for the handover and will be appropriately maintained until the process has been finalised.

Insurance

The perception of risk in the mining industry has improved, with insurers offering more competitive rates for mining companies. In 2024, insurance premiums for the Group increased marginally by 2% compared to 2023. The Group is in the third year of a five-year multi-aggregate insurance policy to mitigate the increased risk of higher deductibles in the unlikely event of an unexpected loss.

Letšeng's business interruption claim for insured losses arising out of the COVID-19-related shutdown in 2020, when the mine was required to be placed on care and maintenance, is ongoing.

Share-based payments

The share-based payment charge for the year was US$0.5 million (2023: US$0.3 million). In line with the approved 2021 Remuneration Policy, on 17 April 2024, 1 996 048 nil-cost options were granted to certain key employees and Executive Directors under the GDIP. Refer to Note 26, Share-based payments on page 159 for more detail.

TAXATION

The Group applies all relevant principles in accordance with prevailing legislation when assessing its tax obligations. The Group's effective tax rate was 29.4%. Most of the Group's taxes are incurred in Lesotho, which has a corporate tax rate of 25%. The effective tax rate is above the Lesotho corporate tax rate mainly due to deferred tax assets not recognised on losses incurred in other operations, the impact of the alignment of foreign tax at different rates and withholding taxes paid, partially offset by a reduction of the withholding tax provision on unremitted earnings. Refer to Note 6, Income tax expense on page 139 for more detail.

The Group continues to pursue a long-standing legal matter relating to an amended tax assessment that was issued to Letšeng by the Revenue Services Lesotho in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act, 1993. We expect to pursue this matter in the courts in 2025. We have sought senior legal counsel, and their advice indicates good prospects for success. Refer to the accounting treatment for this matter, Note 1.2.26, Critical accounting estimates and judgements, for further detail.

OUTLOOK

The diamond market is expected to remain under pressure, with signs of a modest recovery in diamond prices seen in early 2025. The implementation of Letšeng's updated mine plan will present material challenges for the business, with no availability of Satellite Pipe ore until the end of 2029 while the steeper slopes are implemented. During this period, our focus will remain on factors within our control, including cost containment, sound capital allocation decisions, and maintaining operational efficiencies while responsibly managing our cash resources.

Michael Michael

Chief Financial Officer

12 March 2025

CHIEF OPERATING OFFICER'S REVIEW

The Group delivered strong operational results in 2024, driven by a steadfast focus on efficiency and commitment to safety.

The benefits of the structural changes implemented in 2023 - including management, workforce, and operational methodology adjustments at Letšeng - are evident in the 2024 operational results. Continuous optimisation of Letšeng's mine plan has significantly reduced waste volumes and, together with numerous initiatives implemented during the year to reduce costs, has strengthened the operation's resilience to withstand the challenging conditions that the diamond industry is facing.

As we continue to prioritise the safety and well-being of our workforce, we are proud to report that we maintained an exceptional safety performance in 2024. Our AIFR reached a record low of 0.61, while we achieved an impressive LTIFR of 0.18. These results reflect our unwavering commitment to a culture of safety and operational excellence.

We remain fully committed to our decarbonisation target of a 30% reduction in Scope 1 and 2 emissions by 2030, compared to our 2021 baseline. For a comprehensive overview of our 2024 performance and progress toward this target, refer to the Climate Change Report on page 47.

Following the release of the NI 43-101 Technical Report, which includes Letšeng's 2024 Resource and Reserve Statement, in March 2024 (available on our website at www.gemdiamonds.com), a key focus this year was optimising Letšeng's long-term life of mine plan. Notably, a steeper open pit concept was approved for the final cutback of the Satellite pit, leading to an updated mine plan that was communicated to the market in December 2024. For full details on Letšeng's updated mine plan, refer to page 43.

Jaco Houman joined the Group in 2016 and has been part of Executive Management as Senior Manager: Technical and Projects since 2021. Jaco has decided to pursue other opportunities and will be leaving in March 2025. I would like to thank Jaco for his valuable contributions during his time with us and wish him every success in his new endeavours.

GROUP SAFETY PERFORMANCE

Our safety culture is rooted in a commitment to zero harm. In 2024, the Group maintained exceptional safety standards with zero fatalities (2023: zero) and three LTIs (2023: two). We achieved a record-low AIFR of 0.61 (2023: 0.67), though the LTIFR rose slightly to 0.18 (2023: 0.10) due to an additional LTI and a 22% reduction in man hours from the workforce right-sizing and the insourcing of mining and processing activities.

A dedicated safety programme, guided by independent subject matter experts, provided mentorship to senior management on best-practice safety leadership, and a critical control management strategy has been successfully implemented. Our safety performance reflects the ongoing dedication of our executive and operational management in relentlessly executing the safety maturity strategy, which focuses on critical risk mitigation, enhanced leadership visibility, and engaging the workforce to implement both engineering and behaviour-based safety controls to prevent the occurrence of safety incidents.

The safety of our workforce remains our highest priority and we will continue to strengthen our safety culture.

OPERATIONAL PERFORMANCE

Letšeng

The positive outcomes of initiatives implemented over the past 24 months are clearly reflected in Letšeng's overall operational performance in 2024. These efforts included the successful insourcing of key functions, including mining, processing, and laundry and housekeeping services. Management and the workforce are strategically aligned to continually improve operational efficiencies while maintaining our focus on cost containment.

The initiative introduced in H2 2023 to control the ore feed rate into the treatment plants continued through 2024. This approach yielded positive results, with significant improvement seen in plant stability and an increase in overall plant utilisation to 80% in 2024 (up from 78% in 2023 and 75% in 2022).

External factors, such as a reprieve from Eskom load shedding in the last nine months of 2024, also contributed to enhanced plant stability, eliminating the need for diesel-powered generator switch-overs and reducing both diesel consumption and associated costs. For further details on energy cost reductions, refer to the CFO Review on page 34.

Together with several other optimisation and cost-containment initiatives, these efforts enabled Letšeng to effectively navigate the challenging market conditions of 2024.

1 Includes carats produced from the Letšeng plants and the fines tailings treatment plants.

Waste tonnes mined

Through further short-term optimisation of the mine plan, total waste tonnes mined in 2024 decreased by 39% to 5.4 million tonnes from 8.8 million tonnes in 2023. This welcome reduction in waste mining aligned with the planned 2024 waste mining profile and was complemented by the benefits of initiatives implemented in 2023, including the redesign of the Cut 4 West cutback in the Main pit to minimise waste. The insourcing of mining services, coupled with the successful implementation of a fit-for-purpose fleet management system, significantly improved mining fleet productivity, availability, and utilisation, further optimising waste mining operations and reducing costs.

Ore mined

Total ore tonnes mined in 2024 decreased 7% to 5.1 million tonnes from 5.4 million tonnes in 2023. This was in line with the 2024 mine plan, taking into account the reduced ore treatment capacity following the initiative to reduce the ore feed rate into the plants in H2 2023. The higher volumes in 2023 were also driven by increased mining to the surface ore stockpiles.

Ore treated

Letšeng's two plants treated 5.0 million tonnes of ore in 2024 (2023: 5.0 million tonnes). The similar treatment volumes were driven by improved overall plant utilisation in 2024, offset by the rate slow-down in the treatment plants to enhance stability. Ore contribution from the Main Pipe totalled 2.8 million tonnes, while the Satellite Pipe contributed 2.2 million tonnes, in line with the planned ore distribution between Main and Satellite Pipes for 2024.

Total carats recovered

Total carats recovered in 2024 decreased by 4% to 105 012 carats (2023: 109 656 carats) due mainly to the higher ore contribution from the lower-grade Main Pipe.

4 484 carats (2023: 5 206 carats) were recovered by the fines tailings mobile XRT sorting machine, which re-treated current fines recovery tailings. No tailings were fed through the coarse tailings mobile XRT sorting machine during the year, and it therefore recovered no carats in 2024 (2023: 367 carats).

The overall grade for 2024 was 2.09 cpht, a 4% decrease from 2.18 cpht in 2023. The lower grade achieved was in line with grade expectations for the ore treated in 2024. The lower grade recovered in 2024 is primarily attributable to the higher ore contribution from the lower-grade Main Pipe, which accounted for 56% of ore treated during the year (2023: 41%).

Capital projects

Capital expenditure in 2024 was carefully scrutinised to ensure strict alignment with operational needs and cash management requirements, with a focus on necessity. Material capital projects at Letšeng in 2024 included:

·      completion of the NI 43-101 Technical Report in March 2024, including Letšeng's 2024 Resource and Reserve Statement;

·      necessary modifications and upgrades to the recovery plant and the fines, coarse and final sort;

·      development of the next phase of the Patiseng coarse tailings extension project to ensure future course tailings deposition capacity; and

·      necessary upgrades to storage facilities.

Details of overall costs and capital expenditure incurred at Letšeng are included in the CFO Review on page 33.

The planned capital spend at Letšeng for 2025 includes:

·      the acquisition of essential mining fleet equipment to implement and optimise the mining process in line with the updated mine plan;

·      the removal of the scrubbing units in both treatment plants, to be replaced with pre-primary screens that will enhance ore washing and sizing before the primary screens (this being a more appropriate and cost-effective solution to the replacement of the scrubbing units);

·      the relocation of both the fines and coarse Tomra XRT units for secure re-treatment of fines and coarse recovery tailings; and

·      the purchase of a dry rotary "trommel" unit for sorting high-value Satellite and Main Pipe stockpile material, heavily diluted by basalt, for treatment.

Large diamond recoveries

In 2024, Letšeng recovered 13 diamonds greater than 100 carats, a significant increase compared to five in 2023. Since 2006, a total of 144 diamonds exceeding 100 carats have been recovered. The total number of diamonds greater than 10 carats increased by 1% year on year, with notable gains in the 30 to 60 carat and over 100 carat size categories. Additionally, 23 diamonds sold for over US$1.0 million each in 2024, generating US$63.7 million in revenue.

The pit slope design for the kimberlite (ore) sectors of SC6W remains unchanged, following the current conventional slope angle (14-metre benches and 9-metre catchment berms), as applied in the current Satellite pit cutback (SC5W). The revised SC6W waste slope design has resulted in a reduction of 2.4 million tonnes of ore compared to the previous design. An opportunity to steepen the kimberlite slopes is currently being evaluated, which could provide access to additional ore with minimal to no further waste stripping required.

Main Pipe review

The updated long-term mine plan now incorporates 10.8 million tonnes of additional Main Pipe ore without any additional waste stripping required, thereby extending the life of the Main Pipe by approximately two years. The additional ore relates to 9.9 million tonnes of inferred ore resource and 0.9 million tonnes of unclassified ore from the K2D Main Pipe ore domain, which are both accessible within the current pit design, with no further incremental stripping of waste.

The 9.9 million tonnes of inferred ore now included in the plan occurs at depth, where 1.5 million tonnes will be mined in 2030 and 2031 from the bottom benches of the MC4E cutback, and 8.4 million tonnes will be mined on the bottom benches of the MC4W cutback from 2037 to 2039. A programme to formally upgrade the classification of this inferred ore resource to indicated is being assessed.

The inclusion of 0.9 million tonnes of unclassified K2D ore was a result of successful discrete sampling during the year, and the performance of this ore domain will continue to be monitored as mining progresses. This ore is currently being mined in the MC4E cutback until 2028.

The 9.9 million tonnes of included inferred ore resource adds approximately 165.1k carats while the 0.9 million tonnes of unclassified K2D ore adds approximately 17.2k carats to the updated mine plan.

Updated long-term mine plan

The updated long-term mine plan includes SC5W, MC4E, MC4W, the newly redesigned SC6W based on steeper slopes, and an updated plant throughput rate to life of mine of 5.1 million tonnes per annum. Waste stripping of the SC6W cutback is currently scheduled to commence during the second half of 2025, with initial ore scheduled to be available from the end of 2029, ramping up to an extraction rate of 2.5 million tonnes per annum from 2031 to the life of cutback.

In response to prevailing economic conditions in the diamond industry, the long-term mine plan is under continuous review to identify optimisation opportunities and ensure the viability of each cutback along with its impact on the overall mine value. While flexibility to access additional ore in the Main Pipe has been incorporated, the final cutback in the Main pit (MC4W) is being reassessed. Specifically, we are exploring whether applying a steeper slope design, similar to the approved SC6W steeper slope design in the hard-rock basalt, could enhance the economic margin of this final cutback by reducing waste and/or increasing ore. Results from this assessment are expected in H2 2025.

In addition, our efforts remain focused on maximising the extraction of high-value ore. We are actively exploring all opportunities to recover additional ore from the bottom of SC5W as the cutback approaches its completion in H1 2025. Early indications suggest that further Satellite ore could be accessed by making design adjustments to the bottom of the SC5W pit, with potential recovery occurring in H2 2025 and possibly extending into 2026. However, this could delay the commencement of waste mining in SC6W until 2026. Despite this, initial SC6W lateral support work above the starting elevation of SC6W will continue as planned.

Ghaghoo

The terms for the handover of the Ghaghoo site and the relinquishment of the mining licence to the Botswana Department of Mines have been finalised. Partial rehabilitation and extensive site clean-up activities, which began in the first half of 2023, have been completed safely and cost-effectively. Salvage values from redundant infrastructure, equipment, and scrap metal contributed to offsetting the rehabilitation and clean-up costs.

The required decommissioning and removal of the processing plant and associated infrastructure started in August 2024 and was successfully completed by year end. Once the final clean-up and the removal of related civils have been completed, and following a final site inspection by the Department of Mines and the Department of Environmental Affairs, scheduled for March 2025, the Ghaghoo mining licence will be formally relinquished and the site handed over.

We are pleased to report that no fatalities, no LTIs and no instances of environmental disturbance were recorded at Ghaghoo in 2024.

OUR PLANS FOR 2025

We have several operational objectives for 2025. These include:

·      Implementation of the updated mine plan, including the steeper conventional concept in Satellite Cut 6 West.

·      Extend the life of SC5W for additional Satellite Pipe ore in 2025 and potentially 2026.

·      An enhanced focus on operational efficiencies while closely managing operating costs and capital expenditure.

·      Investing in appropriate renewable and/or alternative energy sources. Viable renewable and/or alternative energy for the mine operations remains a challenge at Letšeng.

DIRECTORS' REPORT

The Directors are pleased to submit the financial statements of the Group for the year ended 31 December 2024.

As a British Virgin Islands-registered company, Gem Diamonds Limited (company registration number: 669758) is not required to conform with the Companies Act, 2006. The Directors have elected to conform with certain of these requirements.

Accordingly, Directors must present a Strategic Report and a Directors' Report to inform shareholders of the Group's performance and prospects and help them evaluate whether the Directors performed their fiduciary duty. The Annual Report and Accounts 2024  discloses how the Directors have performed their duty to ensure the Group's continued success and sustainability, in line with the Companies Act, 2006.

In line with Disclosure Guidance and Transparency Rules (DTR 4.1.5R(3) and DTR 4.1.8R), the required content of the Annual Financial Report and Management Report can be found in the Strategic Report (page 1), the Performance Review (page 29), the Governance section (page 53), the Directors' Report and other sections of the Annual Report and Accounts 2024 as indicated by reference.

The Strategic Report can be found on pages 1 to 53. This will provide shareholders with a balanced assessment of the Group's business including a description of its principal risks and uncertainties. It may not be relied upon by anyone, including the Company's shareholders, for any other purpose.

Forward-looking statements

The Strategic Report and other sections of this report contain forward-looking statements. Forward-looking statements, by their nature, involve several risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future. The actual results and outcomes may differ materially from those expressed or implied by the forward-looking statements. No assurance can be given that the forward-looking statements in the Strategic Report will be realised. Statements about the Directors' expectations, beliefs, hopes, plans, intentions and strategies are subject to change and are based on expectations and assumptions about future events, circumstances and other factors which are, in many instances, outside the Company's control.

The information in the Strategic Report was prepared based on the knowledge and information available to the Directors at the time of its preparation. The Company is under no obligation to update or revise the Strategic Report during 2025. The expectations set out in the forward-looking statements are reasonable but may be influenced by several variables which could cause actual results or trends to differ materially. Forward-looking statements need to be read in context with actual historic information provided. The Company's shareholders are cautioned not to place undue reliance on the forward-looking statements. Shareholders should note that the Strategic Report has not been audited.

CORPORATE GOVERNANCE

DTR 7.2 requires certain information to be included in a corporate governance statement set out in the Directors' Report. The Group has an existing practice of issuing a separate Corporate Governance Code Compliance Report as part of its Annual Report and Accounts. The information required by the Disclosure Guidance and Transparency Rules and the UK Financial Conduct Authority's Listing Rules (UKLR 6.6) is located on pages 53 to 101.

DIRECTORS

The Directors, as at the date of this report, are listed on pages 171 to 173 together with their biographical details. Details of the Directors' interests in shares and share options of the Company can be found on page 99.

Directors who held office during the year and date of appointment

Refer to our stakeholder relationships section on pages 14 to 17 to for more details on our engagement with suppliers, contractors and customers.

EMPLOYEE POLICIES AND PRACTICES

Equal opportunity is a fundamental principle of Gem Diamonds and the Group is committed to achieving equality irrespective of gender, religion, race, marital status or abilities. Refer to page 62 for more details on the Group's employee policies and practices, specifically with regard to the employment of persons with disabilities.

RESULTS AND DIVIDENDS

The Group's attributable profit after taxation amounted to US$2.9 million (2023: loss of US$2.1 million).

The Group's detailed financial results are set out in the financial statements on pages 106 to 165.

The Board is not proposing a dividend based on the 2024 financial results due to the volatility in the current macro-economic outlook, the expected impact thereof on the diamond market, the Group's available cash resources, and the medium-term business outlook with the implementation of Letšeng's updated mine plan, which will result in higher-value Satellite Pipe ore only being accessible from the end of 2029.

The Group's dividend policy considers:

·      The Group's cash resources.

·      The level of free cash flow and earnings generated during the year.

·      Expected funding commitments for future capital projects.

The Board will consider special dividends in the event of significant diamond recoveries and will consider further share buyback programmes if appropriate.

GOING CONCERN

The Group business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report on pages 1 to 53. The financial position of the Group, its cash flows and liquidity position are described in the Strategic Report on pages 33 to 39. In addition, Note 1.2.2, Note 25 and Note 27 to the financial statements include the Group's going concern policy and its objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit and liquidity risk.

The Directors have a reasonable expectation that the Group has adequate financial resources to continue operations for the foreseeable future. This follows a review of forecasts, budgets, timing of cash flows, availability of debt facilities, various cost-reduction initiatives, sensitivity analyses and the uncertainties disclosed in this report. For this reason, the Directors continue to adopt the going concern basis in preparing the Annual Report and Accounts of the Group.

VIABILITY STATEMENT

In accordance with provision 30 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Group over a period longer than the 12 months required by the "going concern" provision. The viability statement, aligned with Provision 31 of the UK Corporate Governance Code 2018, is included in the Strategic Report on page 27.

SUBSEQUENT EVENTS

Refer to Note 29 of the financial statements for details of events subsequent to the reporting date.

SHARE CAPITAL AND VOTING RIGHTS

Details of the authorised and issued share capital of the Company, including the rights pertaining to each share class, are set out in Note 15 to the financial statements.

As at 12 March 2025, there were 139.7 million fully paid ordinary shares of US$0.01 each in issue and listed on the official list maintained by the Financial Conduct Authority in its capacity as the UK Listing Authority. In addition, the Company holds 1.5 million shares as treasury shares acquired during the share buyback programme that was launched in 2022. These treasury shares are not entitled to dividends and have no voting rights.

The Company has one class of ordinary shares. Shareholders have the right to receive notice of and attend, speak and vote at any general meeting of the Company. Shareholders may be present in person (or, being a corporation, by representative) or by proxy at a general meeting. Every shareholder present in person (or, being a corporation, by representative) or by proxy will have one vote in respect of every ordinary share they hold. The appointment of a proxy to vote at a general meeting must be received no less than 48 hours before the meeting's appointed time.

Shareholders have the right to participate in dividends and other distributions according to their respective rights and interests in the profit of the Company.

No shareholders have any special rights with regard to the control of the Company. The Company is not aware of any agreements between shareholders which may result in restrictions on transfers or voting rights, save as mentioned below.

There are no restrictions on the transfer of ordinary shares other than:

·      As set out in the Company's Articles of Association.

·      Certain restrictions may from time to time be imposed by laws and regulations.

·      Pursuant to the Company's share dealing code, whereby the Directors and employees of the Company require approval to deal in the Company's ordinary shares.

At the AGM held in June 2024, the Board noted the proportion of the votes cast against the resolution referring to the authority of Directors to allot shares (Resolution 13 passed with 69.9% of participating shareholders voting in favour). The CEO met the significant shareholder who voted against Resolution 13 to discuss their voting policy, and although the shareholder has a standing position on these resolutions, the Board will regularly consider its approach to this matter. The resolution reflected UK-listed company market practice and the Board considers the flexibility afforded by the authority to allot shares to be in the best interest of the Company.

At the same AGM, shareholders authorised the Company to make on-market purchases of up to 13 969 001 of its ordinary shares, representing approximately 10% of the Company's issued share capital at that time. In 2022, the Company purchased 1 520 170 of its ordinary shares, which are being held as treasury shares and may be used to settle ESOP and GDIP awards.

At the 2025 AGM, shareholders will be requested to renew this authority. The Directors continue to consider various options and keep the authorisation under regular review. The 2025 Notice of AGM will set out the details regarding exercising voting rights and proxy appointments.

MAJOR INTERESTS IN SHARES

Details of the major interests (at or above 3%) in the issued ordinary shares of the Company are set out in the Strategic Report on page 15.

ARTICLES OF ASSOCIATION

Any proposed amendments to the Articles of Association of the Company need to be approved by shareholders by special resolution.

RESOURCE DEVELOPMENT

The NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement was published in March 2024 and is available on the Group's website at www.gemdiamonds.com. Following the approval of the mine optimisation plan to steepen the slopes in the Satellite pit, an updated mine plan has been designed which will significantly decrease waste volumes. The COO Review on page 43 provides more detail on this.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY

Read more about the Group's 2024 Sustainability Performance, including CSI investment, community participation and environmental management, in our Sustainability Report 2024 which is available at www.gemdiamonds.com.

POLITICAL DONATIONS

The Group made no political donations or incurred any political expenditure during 2024.

TCFD, CARBON EMISSIONS AND ENERGY CONSUMPTION SUMMARY

Information on the Group's decarbonisation strategy, adoption of the TCFD recommendations, carbon footprint and energy consumption in 2024 can be found in our Sustainability Report, which is available at www.gemdiamonds.com, and Climate Change Report on page 47.

DISCLOSURE OF INFORMATION TO AUDITOR

Each of the persons who are Directors at the time when this Directors' Report is approved confirms that, so far as they are aware, there is no relevant audit information of which the Company's auditor is unaware and that they have taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

By order of the Board

Harry Kenyon-Slaney

Non-Executive Chairperson

12 March 2025

 CONSOLIDATED STATEMENT
OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2024

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

1    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.1    Corporate information

1.1.1     Incorporation

The holding company, Gem Diamonds Limited (the Company), was incorporated on 29 July 2005 in the British Virgin Islands (BVI) and is domiciled in the United Kingdom (UK). The Company's registration number is 669758.

These financial statements were authorised for issue by the Board on 12 March 2025.

The Group is principally engaged in operating diamond mines.

1.1.2    Operational information

The Company has the following investments directly and indirectly in subsidiaries at 31 December 2024.

1     The cost of investment represents original cost of investments at acquisition dates.

2    No change in the shareholding since the prior year.

3    In 2024, the Company subscribed for an additional 4.1 million shares of £1.00 each in Gem Diamonds Investments Limited as part of an intercompany restructuring process.

1.1.3    Segment information

For management purposes, the Group is organised into geographical units as its risks and required rates of return are affected predominantly by differences in the geographical regions of the mines and areas in which the Group operates, or areas in which operations are managed. The below measures of profit or loss, assets and liabilities are reviewed by the Chief Operating Decision-Maker, i.e. the Board of Directors. The main geographical regions, and the type of products and services from which each reporting segment derives its revenue are:

·      Lesotho (diamond mining activities);

·      Belgium (sales, marketing and analysis of diamonds);

·      BVI, RSA, UK and Cyprus (technical and administrative services); and

·      Botswana (diamond mining activities, currently on care and maintenance).

Management monitors the operating results of the geographical units separately for the purpose of making decisions about resource allocation and performance assessment.

Segment performance is evaluated based on operating profit or loss. Inter-segment transactions are entered into under normal arm's length terms in a manner similar to transactions with third parties. Segment revenue, segment expenses and segment results include transactions between segments. Those transactions are eliminated on consolidation.

Segment revenue is derived from mining activities, polished manufacturing margins and diamond analysis.

The following tables present revenue from contracts with customers, profit/(loss) for the year, underlying EBITDA and asset and liability information from operations regarding the Group's geographical segments: